Brokerage : Kiwoom Securities
Analyst : Sowon Kim
Investment Rating : BUY (Maintained)
Target Price : KRW 170,000 (Lowered)
Core Momentum : Continued strength in AI server and automotive MLCCs, alongside the 2H25 visibility of new growth drivers including AI accelerator substrates, glass substrates, and humanoid robotics.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained), Target Price lowered to KRW 170,000
- Valuation Status: Shares trade near historical lows at a 12-month forward P/B of 0.95x
- Annual Earnings Forecasts (K-IFRS Consolidated):
- 2024A: Revenue KRW 10.294 Trillion / Operating Profit KRW 735.0 Billion / Net Profit (Controlling) KRW 679.1 Billion
- 2025F: Revenue KRW 11.096 Trillion / Operating Profit KRW 848.9 Billion (YoY +15%) / Net Profit (Controlling) KRW 687.3 Billion
- 2026F: Revenue KRW 11.913 Trillion / Operating Profit KRW 993.6 Billion / Net Profit (Controlling) KRW 791.8 Billion
- Key Valuation Multiples (2024A → 2025F → 2026F):
- PER: 14.1x → 13.8x → 11.9x
- PBR: 1.09x → 0.98x → 0.89x
- EV/EBITDA: 6.0x → 4.5x → 3.8x
- ROE: 8.2% → 7.5% → 7.8%
- EPS: KRW 8,752 → KRW 8,857 → KRW 10,200
- Net Debt Ratio: -2.8% → -12.1% → -17.8%
- Quarterly Performance & Outlook:
- 1Q25 Review: Revenue KRW 2.739 Trillion (YoY +5%, QoQ +10%), Operating Profit KRW 200.5 Billion (YoY +9%, QoQ +74%), meeting market expectations (OP KRW 200.4 Billion).
- 2Q25 Preview: Projected Revenue of KRW 2.743 Trillion (YoY +7%, QoQ Flat), Operating Profit of KRW 218.0 Billion (YoY +3%, QoQ +9%). Operating profit is expected to fall 8% short of consensus due to optics seasonality and legacy BGA sluggishness.
🚀 2. [Market Opportunities & Business Outlook]
- Component (MLCC) Continued Momentum:
- Broad-based demand expansion supported by China’s trade-in subsidies, pre-tariff inventory pull-ins, AI servers, and ADAS expansion in Chinese EVs.
- 1Q25 MLCC shipments grew +14% QoQ; blended ASP declined -3% QoQ due to higher commodity IT mix.
- 2Q25 earnings will continue solid trends driven by AI servers and automotive demand, bolstered by market share gains across global Tier-1 automotive OEMs.
- Package Substrate Ramp & Diversification:
- Full-scale supply of FC-BGA substrates for Big Tech AI accelerators commences in 2Q25 (though offset near term by legacy BGA weakness).
- Annual earnings expansion supported by rising Non-IT revenue share and substrate diversification across new applications and customers.
- Limited Tariff Exposure & 2H25 Emerging Catalysts:
- Low direct revenue exposure to the US, localized supply capability from Chinese MLCC plants, and diversified production bases (e.g., Philippines) effectively mitigate tariff risks.
- Key 2H25 catalysts include expanded supply of AI server FC-BGA substrates and silicon capacitors, camera module shipments for humanoid robotics, and pilot line operation for glass substrates.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics not as a cyclical vendor constrained by consumer IT set demand delays and tariff concerns, but as an advanced hardware leader effectively insulated by robust AI server and automotive MLCC demand and a geographically diversified manufacturing footprint. Greater significance is attached to the deep valuation support near historical lows (12MF P/B 0.95x) and upcoming 2H25 catalysts—including AI accelerator FC-BGA ramp-ups, glass substrate pilot operations, and humanoid robotics modules—rather than near-term substrate mix adjustments.
To verify whether this investment thesis materializes going forward, investors should monitor whether AI server and Chinese EV MLCC demand sustains the projected 2Q25 operating profit of KRW 218.0 Billion, whether AI accelerator FC-BGA shipments to Big Tech accounts scale successfully, and whether 2H25 operational milestones—such as the glass substrate pilot line launch and camera module shipments for humanoid robots—progress as scheduled. These developments can be tracked through upcoming quarterly earnings releases, official IR materials, and regulatory filings.
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